Hindenburg impact: S&P downgrades outlook on Adani Ports, Adani Electricity to negative

S&P Global Ratings downgraded outlook on two Adani Group businesses, Adani Ports and Adani Electricity, to negative from stable.

"There is a risk that investor concerns about the group's governance and disclosures are larger than we have currently factored into our ratings, or that new investigations and negative market sentiment may lead to increased cost of capital and reduce funding access for rated entities," S&P said in a statement.

"We affirmed our issuer and issue ratings on the entities as their business fundamentals remain intact, short-term liquidity is adequate, and debt maturities in the next 12 months are manageable," it added.

The shares and bond prices of Adani Group firms have fallen dramatically as a result of a US short-seller Hindenburg Research citing serious governance flaws for the Adani Group, many of which relate to disclosures and actions at the shareholder level.

Due to market volatility, the company has responded to the claims and opted to return cash from a fully subscribed $2.4 billion offer of shares in the promoters' flagship company Adani Enterprises Ltd.

"The negative outlook reflects the risk of a deterioration in the credit profile of Adani Ports and Adani Electricity Mumbai due to governance risks and funding challenges for the larger Adani Group," S&P said in statement.

It added that the short seller's allegations may hit the Adani Group's ability to raise fresh equity or borrow.

Earlier on Friday, Moody's said its ratings for Adani Ports and Special Economic Zone, Adani Green Energy and Adani Transmission were not changed, however it also warned the sell-off could affect financing options.

"These adverse developments are likely to reduce the group's ability to raise capital to fund committed capex or refinance maturing debt over the next 1-2 years," Moody's said in a statement that also pointed out that companies has some financial space.

"We recognise that a portion of the capex is deferrable, and the rated entities do not have significant maturing debt until FY2025," the ratings agency added.

Separately, Fitch Ratings said that it did not expect material changes to Adani Group's cash flow forecast.

Fitch has ratings on eight entities within the Adani group, including Adani Transmission Ltd, Adani Electricity Mumbai Ltd and Adani International Container Terminal.

"Our ongoing monitoring will be looking closely at any major changes to the rated entities' access to financing or cost of financing on a long-term basis, unfavourable regulatory/legal developments or ESG-related matters that could affect credit profiles," the ratings agency said in a report.